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HQ 113515

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August 3, 1995

VES-3-02/07-CO:R:IT:C 113515 BEW

CATEGORY: CARRIER

Mr. Marc D. Kraft
Pacific Yachting & Sailing
790 Mariner Park Way
Santa Cruz, California 95062

RE: Coastwise Trade; Passengers; Sailing School; 46 U.S.C. App. 289; 46 U.S.C. App. 883

Dear Mr. Karft:

This is in response to your letter of August 2, 1995, concerning the use of non-coastwise-qualified vessels in the territorial waters of Santa Cruz, California, as part of a sailing school fleet.

FACTS:

You state that you are the owner of a Sailing School and bareboat charter company located in Santa Cruz, California; that you have a fleet of 17 sailing yachts, ranging from 27 feet to 43 feet, with auxiliary diesel engines. All of the vessels are owned by separate boat owners, and that four (4) of the 17 yachts are not documented. You state that they are however, registered with the state of California. You state that you are a Sailing Certified and American Sailing Association Certified sailing school.

You state that recently you were informed that all of your vessels must be documented. You request a ruling giving you an exemption from documentation. Questions relating to documentation of vessels are within the jurisdiction of the United States Coast Guard. If you wish to ask Coast Guard about this topic, you may contact you local office or write to:

Mr. Thomas Willis
Chief, Vessel Documentation
U.S. Coast Guard (GMVI-6/13)
2100 Second Street, SW. (Room 1312)
Washington, D.C. 20593-0001
You inquire as to whether the Customs laws and regulations would permit non-coastwise qualified vessels to be used for the transportation of students of a sailing school without violating the coastwise passenger law.

ISSUE:

Whether, under the stated facts, the use of non-coastwise-qualified vessels as a part of a sailing school fleet would be in violation of the coastwise passenger law, 46 U.S.C. App. 289.

LAW AND ANALYSIS:

Generally, the coastwise laws (e.g., 46 U.S.C. App. 289 and 883, and 46 U.S.C. 12106 and 12110) prohibit the transportation of merchandise or passengers between points in the United States embraced within the coastwise laws in any vessel other than a vessel built in and documented under the laws of the United States, and owned by persons who are citizens of the United States.

The coastwise law pertaining to the transportation of merchandise, section 27 of the Act of June 5, 1920, as amended (41 Stat. 999; 46 U.S.C. App. 883, often called the Jones Act), provides that:

No merchandise shall be transported by water, or by land and water, on penalty of forfeiture of the merchandise (or a monetary amount up to the value thereof as determined by the Secretary of the Treasury, or the actual cost of the transportation, whichever is greater, to be recovered from any consignor, seller, owner, importer, consignee, agent, or other person or persons so transporting or causing said merchandise to be transported), between points in the United States ... embraced within the coastwise laws, either directly or via a foreign port, or for any part of the transportation, in any other vessel than a vessel built in and documented under the laws of the United States and owned by persons who are citizens of the United States ....

The passenger coastwise law, 46 U.S.C. App. 289, provides that:

No foreign vessel shall transport passengers between ports or places in the United States either directly or by way of a foreign port, under penalty of $200 for each passenger so transported and landed. For purposes of the section 289, vessel "passenger" is defined as "... any person carried on a vessel who is not connected with the operation of such vessel, her navigation, ownership, or business." (Section 4.50(b), Customs Regulations.) Section 4.80a, Customs Regulations (19 CFR 4.80a) is interpretive of section 289.

In its administration of 46 U.S.C. App. 289, the Customs Service has ruled that the carriage of passengers entirely within territorial waters, even though the passengers disembark at their point of embarkation and the vessel touches no other coastwise point, is considered coastwise trade subject to coastwise laws. However, the transportation of passengers to the high seas (i.e., beyond U.S. territorial waters) and back to the point of embarkation, assuming the passengers do not go ashore, even temporarily, at another United States point, often called a "voyage to nowhere", is not considered coastwise trade. It should be noted that the carriage of fishing parties for hire, even if the vessel proceeds beyond territorial waters and returns to the point of the passenger's embarkation, is considered coastwise trade (TD 55193(2)).

In interpreting the coastwise laws, Customs has ruled that a point in United States territorial waters is considered a point embraced within the coastwise laws. The coastwise laws generally apply to points in the territorial sea, defined as the belt, three (3) nautical miles wide, seaward of the territorial sea baseline, and to points located in internal waters, landward of the territorial sea baseline, in cases where the baseline and the coastline differ.

Given the foregoing definition of "passenger", the Customs Service has held that a person being trained or receiving instruction in the handling or navigation of a vessel, and whose presence on board the vessel is necessarily required in order to receive such training or instruction, is not a "passenger" within the meaning of the coastwise laws. Accordingly, if the subject vessels are used only for such training it would not be required to have a license to engage in the coastwise trade (see Customs Letter Rulings 109850, dated December 27, 1988 and 109287, dated February 24, 1988).

We have consistently held that vessel equipment and stores are not considered "merchandise" for purposes of section 883 when transported in the vessel by which they are used (see Customs letter rulings 106910, dated July 9, 1984, and 108223, dated March 13, 1986).

Therefore, the sole use of a non-coastwise-qualified sailing vessel in connection with a bona fide instructional course in sailing and navigation does not constitute coastwise trade within the meaning of 46 U.S.C. App. 289.

However, all persons being carried in the vessel must be involved with the operation, navigation, or business of the vessel. A person who is carried on board a vessel for recreational purposes and who pays a fee for such carriage would be considered a "passenger" and his carriage between places in the United States or entirely within U.S. waters would be in violation of the coastwise laws.

HOLDING:

The sole use of a non-coastwise-qualified sailing vessel in connection with a bona fide instructional course in sailing and navigation does not constitute coastwise trade within the meaning of 46 U.S.C. App. 289.

Sincerely,

Arthur P. Schifflin
Chief

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